PRESS RELEASE: Lloyds Banking Group PLC: 2020 Q3 -9-

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PRESS RELEASE: Lloyds Banking Group PLC: 2020 Q3 Interim Management StatementDGAP-News: Lloyds Banking Group PLC / Key word(s): Quarter Results
Lloyds Banking Group PLC: 2020 Q3 Interim Management Statement

2020-10-29 / 08:00
The issuer is solely responsible for the content of this announcement.

Lloyds Banking Group plc

Q3 2020 Interim Management Statement

29 October 2020

GROUP CHIEF EXECUTIVE’S STATEMENT

The impact of the coronavirus pandemic on the global economy and
on people and businesses within the UK has been unprecedented.
We remain focused on working together with the Government and
our regulators to ensure that we continue to support our
customers in this challenging time.

Although our performance has clearly been impacted by the
pandemic and the associated challenging economic environment, I
am pleased that we are now seeing an encouraging business
recovery and, with impairments significantly lower, a return to
profitability in the third quarter. In particular, we increased
open mortgage book lending by GBP3.5 billion in the quarter, with
a 22 per cent share of approvals building a strong pipeline for
the fourth quarter, and have supported businesses with an 18 per
cent share of Government support scheme lending. Given the
financial performance we were able to further strengthen our
capital position to 15.2 per cent and enhance our guidance for
impairment and risk-weighted assets.

The pandemic has accelerated many trends around ways of working
and digital adoption and our long-run investment in digital
propositions has positioned the Group well to continue to
support our customers. As a result the number of digital users
continued to increase, the proportion of products sold digitally
is rising and customer satisfaction is at record levels. Our
digital proposition and focus on technological change will
remain a priority as we accelerate our transformation.

Societal expectations of companies, particularly regarding
sustainability, continue to increase and we are taking action to
build an inclusive and more sustainable future. We have
announced a Race Action plan to drive cultural change, including
a clear target to increase Black representation in senior roles.
To support the transition to a more environmentally sustainable
future, we have also announced an ambitious goal to help reduce
the carbon emissions we ?nance by over 50 per cent by 2030.

Lloyds Banking Group plays a vital role in the UK economy and I
remain very proud of the support that we have provided over the
course of 2020. Once again I would like to express my gratitude
to all of my colleagues whose dedication and hard work ensures
that we continue to deliver vital services to our customers and
communities, while supporting those most in need throughout the
pandemic.

Although the outlook remains uncertain, our customer-focused
strategy and the strength of the Group’s business model will
allow us to continue to help Britain recover and play our part
in helping to return the UK to prosperity. This is fully aligned
with the Group’s long-term strategic objectives, the position of
the franchise and the interests of our shareholders.

António Horta-Osório,

Group Chief Executive

RESULTS FOR THE NINE MONTHS ENDED 30 SEPTEMBER 2020

Business transformation and franchise strength position the Group well

* Multi -channel distribution model, including the UK’s largest branch network and UK’s leading digital bank with 17.1 million
digitally active users and 12.1 million active mobile app users, up 700,000 and 1.4 million respectively over the last nine months

* Digital activity and engagement continues to increase, with an average of 25 logons per customer, per month. 85 per cent of
products are now originated digitally, with an 18 per cent increase over the last nine months, and record levels of customer
satisfaction with the digital net promoter score at 69, up 8 per cent in the nine months

* Actively supporting customers through a range of flexible propositions, including around 1.2 million payment holidays and c.GBP11
billion of lending through Government schemes, with an 18 per cent market share of support scheme lending, including a 21 per cent
share of Bounce Back Loans

* Continued commitment to cost efficiency, creating capacity to invest in the business and enabling a rapid response to the
challenges presented by the coronavirus pandemic

* Accelerating our transformation as we respond to the crisis by further enhancing and adapting our strategy, customer propositions
and working practices

RESULTS FOR THE NINE MONTHS ENDED 30 SEPTEMBER 2020 (continued)

Resilient business model with return to profitability in the third quarter

* Net income of GBP10.8 billion, down 17 per cent, with GBP3.4 billion in the third quarter, reflecting lower interest rates and lower
other income. Lower net interest margin of 2.54 per cent, reflecting lower rates, actions taken to support customers and changes in
asset mix. Net interest margin of 2.42 per cent in the third quarter, up 2 basis points and average interest-earning assets slightly
higher in the quarter, both supported by strong volume growth

* Other income decreased by 23 per cent to GBP3.4 billion, with GBP1.0 billion in the third quarter, reflecting lower levels of customer
activity across the Group’s main business lines and the impact of the Asset Management Market Review

* Total costs of GBP5.8 billion, 4 per cent lower, with business as usual costs down 5 per cent, enabling continued investment in
digital projects and enhanced support for customers during the pandemic. Total costs of GBP1.9 billion in the third quarter lower than
prior year

* Trading surplus of GBP5.0 billion, including GBP1.5 billion in the quarter, providing significant capacity to absorb impairment impacts
of the coronavirus crisis

* Impairment experience benign in third quarter with a charge of GBP0.3 billion, in line with pre-crisis levels and reflecting no
significant change in economic outlook; GBP4.1 billion charge in the nine months primarily reflecting deterioration in economic outlook
recognised in the first half of 2020

* Return to profitability in the third quarter with statutory profit before tax of GBP1.0 billion and profit after tax of GBP0.7 billion;
return on tangible equity of 7.4 per cent in the quarter

Strong balance sheet and capital position, well positioned to absorb future coronavirus impacts

* Activity levels picked up in the third quarter of 2020 after contraction in the first six months, particularly mortgage
applications and consumer spending

* Loans and advances at GBP439 billion were flat on year end with increased SME lending driven by Government support schemes, offset by
expected reductions in the closed mortgage book and lower credit card, motor finance and other Commercial Banking balances

* Open mortgage book up GBP3.5 billion since June 2020; 22 per cent market share of approvals with a strong pipeline

* Retail current accounts continued to increase ahead of the market in the third quarter, with Group deposits up GBP35 billion, or 9
per cent, over the first nine months of 2020 as a result of inflows to the Group’s trusted brands

* Loan to deposit ratio of 98 per cent, providing a strong liquidity position and significant potential to lend into recovery

* CET1 ratio of 15.2 per cent, 14.0 per cent pre IFRS 9 transitional relief, gives significant headroom above ongoing target of
around 12.5 per cent plus a management buffer of around 1 per cent and regulatory requirements of c.11 per cent

Outlook

* The outlook remains highly uncertain given the second wave of coronavirus, Government response including social distancing measures
and the end of the furlough scheme, together with the ongoing Brexit negotiations

* Mortgage activity picking up strongly and increase in Retail current accounts ahead of the market; mortgage business strength
offsetting yield curve pressure

* Solid pre-provision profit and enhanced capital strength provide significant loss absorbing capacity, building on our cost
leadership position

* The Group’s 2020 guidance reflects a proactive response to the challenging economic environment and is based on the Group’s current
macroeconomic assumptions

– Net interest margin expected to remain broadly stable around c.240 basis points in the fourth quarter, resulting in a full year
margin of c.250 basis points

– Operating costs to be below GBP7.6 billion

– Impairment charge for the full year now expected to be at the lower end of the GBP4.5 billion to GBP5.5 billion range

– Risk-weighted assets now expected to be broadly stable compared to 30 September 2020

* Although the economic outlook remains uncertain, the Group remains well positioned for long-term superior and sustainable returns,
supported by its leading efficiency position and prudent balance sheet. This together with the Group’s capital position and business
model enables it to continue to support its customers and help Britain recover

INCOME STATEMENT – UNDERLYING BASIS

Nine Nine Three Three
months months months months
ended ended ended ended
30 Sep 30 Sep 30 Sep 30 Sep
2020 2019 Change 2020 2019 Change
GBPm GBPm % GBPm GBPm %

Net interest 8,096 9,275 2,618 3,130
income (13) (16)
Other income 3,449 4,465 (23) 988 1,315 (25)
Operating (734) (731) (208) (258)
lease
depreciation – 19
Net income 10,81 13,00 3,398 4,187
1 9 (17) (19)
Operating (5,55 (5,81 (1,85 (1,91

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PRESS RELEASE: Lloyds Banking Group PLC: 2020 Q3 -2-

costs 7) 7) 4 8) 1) 3
Remediation (254) (226) (12) (77) (83) 7
Total costs (5,81 (6,04 (1,93 (1,99
1) 3) 4 5) 4) 3
Trading 5,000 6,966 1,463 2,193
surplus (28) (33)
Impairment (4,11 (950) (301) (371)
9) 19
Underlying 881 6,016 1,162 1,822
profit (85) (36)
Restructuring (288) (280) (3) (155) (98) (58)
Volatility (159) (339) 29 126
and other
items 53 77
Payment – (2,45 – (1,80
protection 0) 0)
insurance
provision 100 100
Statutory 434 2,947 1,036 50
profit before
tax (85)
Tax credit / 273 (960) (348) (288)
(expense) (21)
Statutory 707 1,987 688 (238)
profit /
(loss) after
tax (64)

Earnings / 0.5p 2.2p 0.8p (0.5)p
(loss) per
share (77)

Banking net 2.54 % 2.89 % 2.42 % 2.88 %
interest
margin (35) bp (46) bp
Average
interest-earn
ing banking
assets GBP434 bn GBP434 bn – GBP436 bn GBP435 bn –
Cost:income 53.8 % 46.5 % 7.3pp 56.9 % 47.6 % 9.3pp
ratio
Asset quality 1.24 % 0.29 % 0.27 % 0.33 %
ratio 95bp (6) bp
Underlying 2.4% 15.7 % (13.3)pp 9.3% 14.3 % (5.0)pp
return on
tangible
equity
Return on 2.5% 6.8 % (4.3)pp 7.4% (2.8)% 10.2pp
tangible
equity

KEY BALANCE SHEET METRICS

At 30 At 30 At 31
Sep Jun Change Dec Change
2020 2020 % 2019 %

Loans and
advances to
customers1 GBP439 bn GBP440 bn – GBP440 bn –
Customer
deposits2 GBP447 bn GBP441 bn 1 GBP412 bn 9
Loan to
deposit ratio 98 % 100 % (2) pp 107 % (9) pp
CET1 ratio3,4 15.2 % 14.6 % 0.6pp 13.8 % 1.4pp
CET1 ratio
pre IFRS 9
transitional
relief3,4 14.0 % 13.4 % 0.6pp 13.4 % 0.6pp
Transitional
MREL ratio3,4 36.5 % 36.8 % (0.3)pp 32.6 % 3.9pp
UK leverage
ratio3,4 5.6 % 5.4 % 0.2pp 5.2 % 0.4pp
Risk-weighted
assets3 GBP205 bn GBP207 bn (1) GBP203 bn 1
Tangible net
assets per
share 52.2 p 51.6 p 0.6 p 50.8 p 1.4 p

1 Excludes reverse repos of GBP60.0 billion (30 June 2020: GBP61.1 billion; 31 December 2019: GBP54.6 billion).

2 Excludes repos of GBP12.1 billion (30 June 2020: GBP12.3 billion; 31 December 2019: GBP9.5 billion).

3 The CET1, MREL and leverage ratios and risk-weighted assets at 31 December 2019 are reported on a pro forma basis, reflecting the
dividend paid up by the Insurance business in the subsequent reporting period. CET1 ratio pre IFRS 9 transitional relief reflects the
full impact of IFRS 9, prior to the application of transitional arrangements for capital that provide relief for the impact of IFRS
9.

4 Incorporating profits for the period that remain subject to formal verification in accordance with the Capital Requirements
Regulation.

QUARTERLY INFORMATION

Quarter Quarter Quarter Quarter Quarter Quarter Quarter
ended ended ended ended ended ended ended
30 Sep 30 Jun 31 Mar 31 Dec 30 Sep 30 Jun 31 Mar
2020 2020 2020 2019 2019 2019 2019
GBPm GBPm GBPm GBPm GBPm GBPm GBPm

Net interest
income 2,618 2,528 2,950 3,102 3,130 3,062 3,083
Other income 988 1,235 1,226 1,267 1,315 1,594 1,556
Operating
lease
depreciation (208) (302) (224) (236) (258) (254) (219)
Net income 3,398 3,461 3,952 4,133 4,187 4,402 4,420
Operating (1,85 (1,82 (1,87 (2,05 (1,91 (1,94 (1,95
costs 8) 2) 7) 8) 1) 9) 7)
Remediation (77) (90) (87) (219) (83) (123) (20)
(1,93 (1,91 (1,96 (2,27 (1,99 (2,07 (1,97
Total costs 5) 2) 4) 7) 4) 2) 7)
Trading
surplus 1,463 1,549 1,988 1,856 2,193 2,330 2,443
(2,38 (1,43
Impairment (301) 8) 0) (341) (371) (304) (275)
Underlying
profit /
(loss) 1,162 (839) 558 1,515 1,822 2,026 2,168
Restructuring (155) (70) (63) (191) (98) (56) (126)
Volatility
and other
items 29 233 (421) 122 126 (126) (339)
Payment – – – – (1,80 (550) (100)
protection 0)
insurance
provision
Statutory
profit /
(loss) before
tax 1,036 (676) 74 1,446 50 1,294 1,603
Tax (expense)
/ credit (348) 215 406 (427) (288) (269) (403)
Statutory
profit /
(loss) after
tax 688 (461) 480 1,019 (238) 1,025 1,200

Banking net
interest
margin 2.42 % 2.40 % 2.79 % 2.85 % 2.88 % 2.89 % 2.91 %
Average
interest-earn
ing banking
assets GBP436 bn GBP435 bn GBP432 bn GBP437 bn GBP435 bn GBP433 bn GBP433 bn

Cost:income
ratio 56.9 % 55.2 % 49.7 % 55.1 % 47.6 % 47.1 % 44.7 %

Asset quality
ratio 0.27 % 2.16 % 1.30 % 0.30 % 0.33 % 0.27 % 0.25 %
Gross asset
quality ratio 0.28 % 2.19 % 1.35 % 0.39 % 0.40 % 0.38 % 0.30 %

Underlying 9.3% (6.0)% 4.7% 12.2% 14.3% 15.6% 17.0%
return on
tangible
equity
Return on 7.4% (4.8)% 5.0% 11.0% (2.8)% 10.5% 12.5%
tangible
equity

Loans and
advances to
customers1 GBP439 bn GBP440 bn GBP443 bn GBP440 bn GBP447 bn GBP441 bn GBP441 bn
Customer
deposits2 GBP447 bn GBP441 bn GBP428 bn GBP412 bn GBP419 bn GBP418 bn GBP417 bn
Loan to
deposit ratio 98 % 100 % 103 % 107 % 107 % 106 % 106 %
Risk-weighted
assets3 GBP205 bn GBP207 bn GBP209 bn GBP203 bn GBP209 bn GBP207 bn GBP208 bn
Tangible net
assets per
share 52.2 p 51.6 p 57.4 p 50.8 p 52.0 p 53.0 p 53.4 p

1 Excludes reverse repos.

2 Excludes repos.

3 Risk-weighted assets at 30 June 2019 and 31 December 2019 are reported on a pro forma basis reflecting the Insurance dividend paid
to the Group in the subsequent reporting period.

BALANCE SHEET ANALYSIS

At 30 At 30 At 30 At 31
Sep Jun Sep Dec
2020 2020 Change 2019 Change 2019 Change
GBPbn GBPbn % GBPbn % GBPbn %
Loans and
advances to
customers
Open mortgage
book 270.6 267.1 1 271.0 – 270.1 –
Closed mortgage
book 17.0 17.5 (3) 19.1 (11) 18.5 (8)
Credit cards 14.8 15.2 (3) 17.7 (16) 17.7 (16)
UK Retail
unsecured loans 8.2 8.2 – 8.4 (2) 8.4 (2)
UK motor
finance 14.8 15.3 (3) 15.6 (5) 15.6 (5)
Overdrafts 1.0 1.0 – 1.3 (23) 1.3 (23)
Retail other1 10.2 9.7 5 9.2 11 9.0 13
SME2 40.0 38.4 4 32.4 23 32.1 25
Mid Corporates3 4.4 4.6 (4) 5.2 (15) 5.3 (17)
Corporate and
Institutional3 50.2 55.0 (9) 59.2 (15) 54.6 (8)
Commercial
Banking other 4.6 5.0 (8) 5.2 (12) 5.2 (12)
Wealth 0.9 0.9 – 0.9 – 0.9 –
Central items 2.5 2.5 – 2.0 25 1.7 47
Loans and 439.2 440.4 – 447.2 (2) 440.4 –
advances to
customers4

Customer
deposits
Retail current
accounts 91.7 87.5 5 76.1 20 76.9 19
Commercial
current
accounts2,5 45.7 44.2 3 34.6 32 34.9 31
Retail
relationship
savings
accounts 149.9 148.5 1 144.3 4 144.5 4
Retail tactical
savings
accounts 12.5 12.7 (2) 14.1 (11) 13.3 (6)
Commercial

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PRESS RELEASE: Lloyds Banking Group PLC: 2020 Q3 -3-

deposits2,6 132.9 133.8 (1) 135.8 (2) 127.6 4
Wealth 13.6 13.5 1 13.6 – 13.7 (1)
Central items 0.9 0.9 – 0.7 29 0.9 –
Total customer
deposits7 447.2 441.1 1 419.2 7 411.8 9

Total assets 868.9 873.0 – 858.5 1 833.9 4
Total
liabilities 819.4 824.1 (1) 810.4 1 786.1 4

Shareholders’
equity 43.4 42.8 1 42.5 2 41.7 4
Other equity
instruments 5.9 5.9 – 5.4 9 5.9 –
Non-controlling
interests 0.2 0.2 – 0.2 – 0.2 –
Total equity 49.5 48.9 1 48.1 3 47.8 4

Ordinary shares
in issue,
excluding own
shares 70,776m 70,735m – 70,007m 1 70,031m 1

1 Primarily Europe.

2 Includes Retail Business Banking.

3 Commercial Banking segmentation has been updated to reflect new client coverage model.

4 Excludes reverse repos.

5 Primarily non interest-bearing Commercial Banking current accounts.

6 Primarily Commercial Banking interest-bearing accounts.

7 Excludes repos.

REVIEW OF PERFORMANCE

Financial performance reflects challenging economic environment, with return to profitability in the third quarter

The Group’s statutory profit before tax for the nine months ended 30 September 2020 was GBP434 million whilst statutory profit after
tax was GBP707 million. This performance was impacted by the significant impairment charge that was taken during the period, the
majority of which was recognised in the first half reflecting the Group’s revised economic outlook for the UK following the outbreak
of the coronavirus pandemic. In the third quarter, the Group returned to profit with statutory profit before tax of GBP1,036 million
and statutory profit after tax of GBP688 million, largely due to a reduced impairment charge reflecting the relative economic stability
and impact of support measures.

Trading surplus for the first nine months of the year was GBP5,000 million, a reduction of 28 per cent compared to the same period in
2019, reflecting the challenging external environment. Net income was down 17 per cent at GBP10,811 million, driven by both lower net
interest income and lower other income. Against this backdrop the Group continued to deliver further cost savings, with total costs
down 4 per cent, while continuing to invest.

The Group’s underlying profit was GBP881 million for the period, compared to an underlying profit of GBP6,016 million in the first nine
months of 2019, reflecting reduced net income and the significant impairment charge of GBP4,119 million that has been taken in 2020.

The Group’s balance sheet remains strong. Loans and advances to customers were flat on year-end at GBP439 billion whilst during the
third quarter, open mortgage net lending increased by GBP3.5 billion and mortgage applications picked up strongly. Group deposits were
up GBP35 billion to GBP447 billion. Retail current account growth was significant and ahead of the market in the third quarter,
reflecting lower levels of customer spend during the pandemic and inflows to the Group’s trusted brands. Commercial Banking current
account growth reflects the Group’s strong customer relationships and also the placement of Government-supported lending on deposit
by SMEs.

Net income

Net income of GBP10,811 million was 17 per cent lower than in the first nine months of 2019, reflecting both lower net interest income
and lower other income in the period as well as a marginal increase in operating lease depreciation.

Net interest income of GBP8,096 million was down 13 per cent given a reduction in the banking net interest margin and stable average
interest-earning banking assets. The net interest margin reduced by 35 basis points to 2.54 per cent, reflecting the lower rate
environment, actions taken to support customers including interest-free overdrafts, and a change in asset mix, largely as a result of
reduced levels of customer demand during the coronavirus pandemic. The net interest margin in the third quarter of 2.42 per cent
reflected the positive impact of deposit repricing and the resumption of overdraft charges, largely offset by lower income from the
Group’s structural hedge and continued pressure from change in asset mix including lower unsecured balances.

The Group manages the risk to its earnings and capital from movements in interest rates centrally by hedging the net liabilities
which are stable or less sensitive to movements in rates. As at 30 September 2020 the Group’s structural hedge had an increased
approved capacity of GBP200 billion (in part reflecting deposit growth in the first nine months of 2020), a nominal balance of GBP185
billion (31 December 2019: GBP179 billion) and a weighted-average duration of around two years (31 December 2019: around three years).
The Group generated GBP1.9 billion of income from the structural hedge balances in the first nine months of 2020 (nine months to 30
September 2019: GBP2.0 billion). Within this, the benefit from the hedge was GBP1.1 billion over average LIBOR (nine months to 30
September 2019: GBP0.8 billion) with a fixed earnings rate of approximately 0.8 per cent over average LIBOR (30 September 2019: 0.6 per
cent).

Average interest-earning banking assets were stable period-on-period at GBP434 billion with growth due to Government-backed lending to
support corporate clients through the coronavirus crisis and the full impact of the 2019 Tesco acquisition, offset by lower balances
in the closed mortgage book and credit cards as well as the impact of the continued optimisation of the corporate and institutional
book within Commercial Banking. The increase in the third quarter of 2020 to GBP436 billion was partly driven by an increase in
mortgage lending, as a result of a release of pent-up demand following the lifting of lockdown restrictions that were in place in the
first half of the year and changing customer behaviours. Given the pipeline of new mortgage business, the Group expects average
interest-earning assets to continue to benefit in the fourth quarter from increased mortgage lending.

REVIEW OF PERFORMANCE (continued)

Other income decreased by 23 per cent to GBP3,449 million in the first nine months of the year, reflecting lower levels of customer
activity across the Group’s main business lines, largely driven by the coronavirus pandemic. Within Retail, other income fell as a
result of reduced customer spending and the continuing impact of a lower Lex fleet size. Commercial Banking saw lower transaction
banking income as a consequence of coronavirus-related activity levels, with resilience in markets income, whilst Insurance
recognised a gain resulting from a one-off methodology change in the first half of the year, which was more than offset by reduced
levels of new business and a charge in relation to the Group’s response to the Asset Management Market Review in the third quarter.

Other income includes a gain of GBP135 million (GBP181 million in the first nine months of 2019) on the sale of gilts and other liquid
assets, which was recognised in the first half of 2020. The comparative for the first nine months of 2019 included a gain of GBP50
million relating to the sale of the Group’s interest in Vocalink.

In the third quarter, other income of GBP1.0 billion was impacted by the non-recurrence of asset sales and insurance assumption change
gains that occurred in the second quarter, activity levels and a c.GBP80 million charge across Retail and Insurance and Wealth in
relation to the Asset Management Market Review, partly offset by improved Lloyds Development Capital performance. A resilient third
quarter in Retail was supported by increased card spending, whilst Commercial Banking experienced lower markets and modest
transaction banking volumes. Insurance continued to be impacted by reduced levels of new business. Other income is expected to remain
muted in the fourth quarter given activity levels and potential persistency assumption changes.

Operating lease depreciation was flat at GBP734 million in the nine months to 30 September 2020 and included a charge incurred in the
first half of the year to reflect a reassessment of residual values, given the economic outlook. In the third quarter of 2020
operating lease depreciation was GBP208 million reflecting robust disposal performance since markets re-opened and a lower fleet size.

Total costs

Total costs of GBP5,811 million were 4 per cent lower than in the first nine months of 2019, driven by continued reductions in
operating costs.

Operating costs of GBP5,557 million were 4 per cent lower, in the context of continued investment in the Group’s digital proposition
and added coronavirus-related costs. Business as usual costs were down 5 per cent on the prior year driven by ongoing cost
discipline, efficiencies gained through digitalisation and other process and organisational improvements, as well as lower variable
remuneration accruals.

Total investment spend in the first nine months of 2020 amounted to GBP1.6 billion, down 16 per cent on the prior year. Of this GBP0.7
billion related to strategic investment, taking the cumulative strategic spend since the start of GSR3 to GBP2.6 billion. Although the
investment spend continues to be managed carefully in response to the current operating environment, the Group has continued to
prioritise technology and digital projects and will continue to invest through the cycle.

During the first nine months of 2020 the Group capitalised c.GBP1.0 billion of investment spend of which c.GBP0.7 billion related to
intangible assets, which is currently deducted from capital. Total capitalised spend was equivalent to c.60 per cent of above the
line investment, in line with prior periods.

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PRESS RELEASE: Lloyds Banking Group PLC: 2020 Q3 -4-

Remediation charges were GBP254 million (nine months to 30 September 2019: GBP226 million) and included additional charges of GBP77 million
in the third quarter relating to pre-existing programmes.

Despite the continued delivery of reduced costs, the lower net income over the period meant that the Group’s cost:income ratio of
53.8 per cent was higher than in the first nine months of 2019, while the cost:income ratio in the third quarter was 56.9 per cent.

REVIEW OF PERFORMANCE (continued)

Impairment

Nine Nine Three Three
months months months months
ended ended ended ended
30 Sep 30 Sep 30 Sep 30 Sep
2020 2019 Change 2020 2019 Change
GBPm GBPm % GBPm GBPm %

Charges
pre-updated
multiple
economic
scenarios1:
Retail2 976 816 (20) 398 260 (53)
Commercial 211 194 5 129
Banking (9) 96
Other 5 (60) 1 (18)
1,19 950 404 371
2 (25) (9)
Coronavirus 434 – 2 –
impacted
restructuri
ng cases3
Updated
economic
outlook:
Retail 1,44 – (75) –
2
Commercial 851 – (30) –
Banking
Other 200 – – –
2,49 – (105) –
3
Impairment 4,11 950 301 371
charge 9 19

Asset 1.24 % 0.29 % 0.27 % 0.33 %
quality
ratio 95bp (6)bp
Gross asset 1.27 % 0.36 % 0.28 % 0.40 %
quality
ratio 91bp (12) bp

1 Charges arrived at under 31 December 2019 multiple economic scenarios.

2 Retail charge in the third quarter of 2020 includes a GBP205 million management overlay (GBP193 million pre-overlay).

3 Additional charges made during the first nine months of 2020 on cases subject to restructuring at the end of 2019, where the
coronavirus pandemic is considered to have had a direct effect upon the recovery strategy.

At 30 Sep At 30 Jun At 31 Dec

20201 20201 Change 20191 Change
GBPm GBPm % GBPm %

Stage
2
loans
and
advan
ces
to
custo 66,2 67,85
mers 91 8 (2) 38,440 72
Stage
2
loans
and
advan
ces
to
custo
mers
as %
of
total 13.1 % 13.4 % (0.3) pp 7.7 % 5.4pp
Stage
2
ECL2
allow 3,05
ances 7 2,817 9 1,423 115
Stage
2
ECL2
allow
ances
as %
of
Stage
2
drawn
balan
ces 4.6 % 4.2 % 0.4pp 3.7 % 0.9pp

Stage
3
loans
and
advan
ces
to
custo 9,07
mers 4 9,538 (5) 8,754 4
Stage
3
loans
and
advan
ces
to
custo
mers
as %
of
total 1.8 % 1.9 % (0.1) pp 1.8 % –
Stage
3
ECL2
allow 2,57
ances 9 2,763 (7) 1,922 34
Stage
3
ECL2
allow
ances
as %
of
Stage
3
drawn
balan
ces3 29.0 % 29.6 % (0.6) pp 22.5 % 6.5pp

Total
loans
and
advan
ces
to
custo 505, 508,0 498,80
mers4 655 76 – 5 1
Total
ECL2
allow 7,08
ances 4 7,186 (1) 4,142 71
Total
ECL2
allow
ances
as %
of
drawn
balan
ces 1.4 % 1.4 % – 0.8 % 0.6pp

1 Underlying basis. Refer to basis of presentation on page 31.

2 Expected credit loss.

3 Stage 3 ECL allowances as a percentage of drawn balances are calculated excluding loans in recoveries in Retail of GBP183 million (30
June 2020: GBP206 million; 31 December 2019: GBP205 million).

4 Includes reverse repos of GBP60.0 billion (30 June 2020: GBP61.1 billion; 31 December 2019: GBP54.6 billion).

REVIEW OF PERFORMANCE (continued)

The Group impairment charge of GBP4,119 million was significantly higher in the first nine months of the year than in the same period
in 2019. This was primarily driven by the charge in the first half reflecting potential future losses in light of the Group’s revised
economic outlook for the UK as a consequence of the coronavirus pandemic. The charge of GBP301 million taken in the third quarter was
broadly in line with pre-crisis levels and reflected the relative economic stability in the quarter. The Group’s total expected
credit loss (ECL) allowance continues to reflect the net impact of economic scenarios and Government support programmes, with the
increase since 31 December 2019 of GBP3 billion building additional balance sheet resilience.

The Group’s net asset quality ratio was 1.24 per cent compared with 0.29 per cent in the same period in 2019, largely driven by
increases in ECL allowance in the first half of the year. Excluding the updated economic assumptions and coronavirus-impacted
restructuring cases, the asset quality ratio was 0.36 per cent, slightly higher than in the prior period.

Observed credit quality remains robust with arrears and defaults remaining low given the temporary support measures, including
payment holidays and furlough arrangements, that are available. The Retail charge of GBP398 million, pre-updated multiple economic
scenarios, included a GBP205 million management overlay to offset model releases based on third quarter performance, given temporary
support programmes. The charge for the quarter also includes a GBP105 million release reflecting minor changes to the updated economic
outlook, largely relating to house price growth assumptions.

In the quarter, the Group’s ECL allowance was broadly stable at GBP7.1 billion. The ECL represents 1.4 per cent of drawn balances, up
0.6 percentage points from 0.8 per cent at 31 December 2019. The outlook and IFRS 9 base case economic scenario that are used to
calculate the Group’s ECL have been updated to reflect a more resilient economic performance in 2020 than was anticipated at the
half-year, in particular with respect to positive house prices, albeit with no material change to the Group’s medium and long-term
views.

The ECL allowance of GBP7.1 billion at 30 September 2020 remains high by historical standards and, consistent with the Group’s updated
macroeconomic projections, assumes that a large proportion of expected losses will crystallise over the next 12 months as support
measures subside and unemployment increases.

The Group’s ECL allowance continues to reflect a probability-weighted view of future economic scenarios with a 30 per cent weighting
applied to base case, upside and downside scenarios and a 10 per cent weighting to the severe downside. All scenarios have
deteriorated significantly in comparison to their equivalents at the 2019 year end, although they have remained broadly consistent
over the three months to 30 September 2020. The base case upon which these scenarios are built now assumes that unemployment reaches
a rate of 9.0 per cent in the first quarter of 2021, representing the same peak assumed at the half year, albeit one quarter later.
The updated base case also recognises recent growth in house prices which drives an improved near-term forecast relative to that
taken at 30 June 2020. This improvement, alongside a more resilient view on commercial real estate prices, has driven a GBP0.1 billion
reduction to ECL in the third quarter of 2020.

At the half-year an adjustment was made to the severe downside scenario, which was reflected as an overlay, to recognise the greater
levels of uncertainty in the short-term economic outlook and therefore a greater severity of potential adverse shocks than the
modelled severe downside scenario generates. The adjusted severe downside scenario assumes a peak unemployment rate of 12.5 per cent
in the second quarter of 2021 and a GDP drop of 13.3 per cent in 2020. The impact of this adjustment has been estimated at portfolio
level, but remains outside the core IFRS 9 process and as such is reflected as a central overlay of GBP200 million, corresponding to an
estimated GBP2 billion higher ECL provision within the severe downside scenario.

Taking into account the probability weightings attached to each scenario, the Group’s reported ECL reflects an uplift of GBP509 million
from the base case economic scenario ECL (30 June 2020: GBP510 million; 31 December 2019: GBP191 million).

REVIEW OF PERFORMANCE (continued)

Stage 2 loans and advances to customers have remained stable in the third quarter at 13 per cent of the book reflecting the relative
stability of the Group’s asset quality performance and forward-looking economic assumptions. Prudent adjustment of the criteria used
to trigger movement from Stage 1 to Stage 2 within the credit card portfolio has resulted in an additional GBP1.4 billion of up-to-date
assets moving to a Stage 2 lifetime ECL basis, and consequently GBP40 million of additional ECL being recognised. Stage 3 loans and
advances have reduced in the third quarter as a result of limited flows to default alongside write-offs.

In the absence of other credit risk indicators, the granting of payment holidays for coronavirus-related requests is not currently in
and of itself an indication of a significant increase in credit risk and therefore will not automatically result in a customer
balance moving from Stage 1 to Stage 2. Correspondingly, the removal of a customer from payment holiday status does not result in any
change in stage from that which otherwise would have been recognised. The Group’s coverage of Stage 2 assets increased slightly to

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4.6 per cent, reflecting additional Stage 2 card assets, whilst coverage of Stage 3 assets has reduced slightly from 29.6 per cent at
30 June 2020 to 29.0 per cent at 30 September 2020.

Overall the Group’s loan portfolio continues to be well-positioned, reflecting a through-the-cycle approach to credit risk and high
levels of security. The Retail portfolio is heavily weighted toward high quality mortgage lending where low loan-to-value ratios
provide security against potential risks. The prime consumer finance portfolio also benefits from high quality growth in past periods
and the Group’s prudent risk appetite. The commercial portfolio reflects a diverse client base with relatively limited exposure to
the most vulnerable sectors so far affected by the coronavirus outbreak. Within Commercial Banking, the Group’s management of
concentration risk includes single name and country limits as well as controls over the overall exposure to certain higher risk and
vulnerable sectors or asset classes.

Significant uncertainty in the economic outlook remains, including that surrounding Brexit trade negotiations and the ongoing
coronavirus pandemic. The extent of the impairment charge at the full year will depend on the potential severity and duration of the
economic shock in the UK. Currently, given the stability seen in the portfolio since the half-year and based on current macroeconomic
assumptions, the Group expects the impairment charge for the full year to be at the lower end of the GBP4.5 billion to GBP5.5 billion
range.

Commercial Banking lending in key coronavirus-impacted sectors1

At 30 September 2020 At 30 June 2020
Drawn Drawn
as a % as a %
of of
Group Group
loans loans
and and
advanc advanc
Drawn Undrawn es Drawn Undrawn es
GBPbn GBPbn % GBPbn GBPbn %

Retail
non-food 2.3 1.7 0.5 2.4 1.8 0.5
Automotive
dealerships2 1.7 2.2 0.4 2.4 1.5 0.5
Oil and gas 1.4 2.7 0.3 1.4 2.7 0.3
Construction 1.3 1.7 0.3 1.3 1.7 0.3
Hotels 1.8 0.3 0.4 1.9 0.3 0.4
Passenger
transport 1.3 0.6 0.3 1.3 0.6 0.3
Leisure 0.8 0.7 0.2 0.8 0.5 0.2
Restaurants
and bars 0.8 0.4 0.2 0.8 0.5 0.2
Total 11.4 10.3 2.6 12.3 9.6 2.7

1 Lending classified using ONS SIC codes at legal entity level.

2 Automotive dealerships includes Black Horse Motor Wholesale lending (within Retail Division).

The spread of coronavirus has resulted in widespread industry disruption, with some sectors such as travel, transportation, retail
and hospitality particularly impacted. As a proportion of the Group’s overall lending, these sectors remain relatively modest. The
Group expects recovery to be slow in a number of impacted sectors and anticipates long-term structural changes in these and other
sectors. As a result, sector and credit risk appetite continues to be proactively managed to ensure the Group is protected and
clients are supported in the right way.

REVIEW OF PERFORMANCE (continued)

Support measures

Retail payment holiday characteristics1

Mortgages Cards Loans Motor Total
000s GBPbn 000s GBPbn 000s GBPbn 000s GBPbn 000s GBPbn

Total
payment
holiday
s 1,19
granted 477 62.7 320 1.6 264 2.1 132 2.2 3 68.6
First
payment
holiday
still
in
force 14 1.9 24 0.1 23 0.2 12 0.2 73 2.4
Matured
payment
holiday
s –
repayin
g 384 49.5 238 1.2 201 1.6 103 1.7 927 54.0
Matured
payment
holiday
s –
extende
d 61 9.1 38 0.2 34 0.3 9 0.2 142 9.8
Matured
payment
holiday
s –
missed
payment 18 2.2 19 0.1 7 0.0 8 0.1 51 2.4

As a
percent
age of
total
matured
Matured
payment
holiday
s –
repayin
g 83 % 82 % 81 % 80 % 83 % 82 % 86 % 84 % 83 % 82 %
Matured
payment
holiday
s –
extende
d 13 % 15 % 13 % 14 % 14 % 15 % 8 % 10 % 13 % 15 %
Matured
payment
holiday
s –
missed
payment 4 % 4 % 6 % 6 % 3 % 2 % 6 % 7 % 5 % 4 %

1 Mortgages, credit cards and personal loans at 24 October 2020; motor finance at 23 October 2020. Analysis of mortgage payment
holidays excludes St James Place, Intelligent Finance and Tesco; motor finance payment holidays excludes Lex Autolease. Total payment
holidays granted are equal to the sum of first payment holiday still in force and matured payment holidays.

Government-backed loan schemes1

000s GBPbn

Coronavirus Business Interruption Loan Scheme 9 2.0
Bounce Back Loan Scheme 278 8.4

1 Data as at 23 October 2020.

Around 1.2 million retail payment holidays, on GBP69 billion of lending, have been granted to help alleviate temporary financial
pressure on customers during the crisis, of which there are c.73,000 (GBP2.4 billion) where the first payment holiday is still in force
and 1.1 million (GBP66.2 billion) that have matured, including c.142,000 (GBP9.8 billion) that have then been extended. Payment holidays
of up to three months have been granted across a range of retail products including mortgages, personal loans, credit cards and motor
finance, with extensions available of up to three months should customers request them.

The vast majority of first payment holidays (96 per cent) have now matured, of which 82 per cent by value have restarted payments, 15
per cent have been extended and 4 per cent have missed payment. Of the mortgage payment holidays that have been extended 30 per cent
have now matured with around 90 per cent having resumed payment.

Mortgages account for the largest proportion of payment holidays, with a total of around 477,000 having been granted, equating to
customer balances of GBP62.7 billion. As at 24 October 2020, 97 per cent, or 463,000, have matured with 83 per cent, or 384,000, of
those having resumed repayments, 13 per cent extended and 4 per cent having missed payment. The average LTV of customers extending
their mortgage payment holidays and still in extension remains relatively low at 51.6 per cent, compared to 43.5 per cent for the
total mortgage book.

The Group also granted 320,000 payment holidays on GBP1.6 billion of credit card balances, 264,000 payment holidays on GBP2.1 billion of
unsecured personal loans and 132,000 payment holidays on GBP2.2 billion of motor finance products. These products are also experiencing
c.80 per cent of customers resuming payments at the end of their payment holidays. Only GBP0.2 billion of credit card balances have
been subject to a payment holiday extension and are still in extension, with GBP0.1 billion having missed payment.

Across all products, customers who are still in extension remain of a typically lower credit quality than the wider book and tend to
have higher average balances than customers who have not requested payment holidays.

REVIEW OF PERFORMANCE (continued)

The Group continues to recognise interest income for the duration of payment holidays and in the absence of other credit risk
indicators, the granting of a coronavirus-related payment holiday does not automatically result in a transfer between stages for the
purposes of IFRS 9, albeit 35 per cent are classified as Stage 2 based on established criteria.

Within SME, the Group has granted c.33,000 capital repayment holidays, equivalent to c.GBP5.9 billion with low levels of maturities to
date.

Statutory profit

The Group’s statutory profit after tax of GBP707 million was impacted by lower income and the significantly increased impairment
charge.

Restructuring costs of GBP288 million for the first nine months of the year were broadly stable on prior year. Costs were higher in the
third quarter at GBP155 million as the Group resumed its property optimisation programme and organisational and role reduction
activities that were paused earlier in the year, and this is expected to continue into the fourth quarter.

Volatility and other items of GBP159 million in the first nine months of 2020 included GBP320 million of negative insurance volatility,
largely driven by falling equity markets and widening corporate bond credit spreads, offset by positive banking volatility of GBP365
million, primarily reflecting exchange rate and interest rate movements. Comparatives for the first nine months of 2019 include a
one-off charge for exiting the Standard Life Aberdeen investment management agreement.

No further provision has been taken for PPI in the first nine months of 2020. Good progress has been made with the review of PPI
information requests received and the conversion rate remains low and consistent with the provision assumption of around 10 per cent.
The unutilised provision at 30 September 2020 was GBP328 million.

The Group recognised a tax credit of GBP273 million in the period, primarily as a result of an uplift in the value of deferred tax
assets of c.GBP350 million recognised in the first half of 2020. This change reflected the corporation tax rate remaining at 19 per
cent, which was substantively enacted on 17 March 2020.

Balance sheet

At 30 Sep At 31 Dec Change
2020 2019 %

Loans and

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advances
to
customers
1 GBP439 bn GBP440 bn –
Customer
deposits2 GBP447 bn GBP412 bn 9
Loan to (9) pp
deposit
ratio 98 % 107 %

Wholesale
funding3 GBP116 bn GBP124 bn (7)
Wholesale
funding
maturity3 GBP36 bn GBP39 bn (9)
Of which
money-mar
ket
funding
maturity3 GBP24 bn GBP25 bn (2)
Liquidity
coverage
ratio –
eligible
assets4 GBP139 bn GBP130 bn 6
Liquidity
coverage
ratio5 138 % 137 % 1pp

1 Excludes reverse repos of GBP60.0 billion (31 December 2019: GBP54.6 billion).

2 Excludes repos of GBP12.1 billion (31 December 2019: GBP9.5 billion).

3 Excludes balances relating to margins of GBP6.1 billion (31 December 2019: GBP4.2 billion).

4 Eligible assets are calculated as an average of month-end observations over the previous 12 months post liquidity haircut. 2019
assets have been restated accordingly.

5 The Liquidity coverage ratio is calculated as a simple average of month end observations over the previous 12 months.

REVIEW OF PERFORMANCE (continued)

Loans and advances to customers were stable compared to the year-end at GBP439 billion. The open mortgage book at 30 September 2020 is
slightly higher than the year end, having increased GBP3.5 billion since 30 June 2020 given the market recovery and with improved new
business margins. The closed mortgage book has continued to reduce, as expected, whilst credit card and motor finance balances are
also lower, primarily as a result of reduced customer activity in the second quarter.

Commercial Banking has continued to focus on supporting SME clients through access to Government lending schemes and providing access
to liquidity facilities for corporate and institutional clients. SME balances including Retail Business Banking at GBP40 billion have
increased 25 per cent over the period as clients have made use of government-backed schemes to safeguard their cash flow during the
pandemic. The Group has granted GBP8.4 billion of Bounce Back Loans, including those granted to Retail Business Banking clients and has
extended GBP2.0 billion under the Coronavirus Business Interruption Loan Scheme, representing a total market share of Government-backed
lending of 18 per cent. More broadly commercial lending was impacted by lower transaction banking volumes due to reduced client
activity, the continued optimisation of the corporate and institutional book and revolving credit facilities returning to year-end
levels.

The Group continues to see funding benefits with Retail current account balances up 19 per cent on the year-end to GBP92 billion
reflecting reduced levels of consumer spending and the strength of the Group’s trusted brands. Commercial current account balances
were up 31 per cent on the year end at GBP46 billion, including the impact within the SME portfolio from the placement of
Government-supported lending on deposit. The Group’s loan to deposit ratio has fallen to 98 per cent from 107 per cent at 31 December
2019 driven by the 9 per cent increase in customer deposits.

The Group has maintained its strong funding and liquidity position with a stable liquidity coverage ratio of 138 per cent. In
addition to its sizable liquid asset buffer averaging GBP138.5 billion over the last twelve months, the Group has a significant amount
of pre-positioned collateral eligible for use in a range of central bank facilities.

The Group continues to access wholesale funding markets across a variety of currencies and markets to maintain a stable and diverse
source of funds. During this period, the Group repaid all outstanding amounts of its Term Funding Scheme (TFS) drawings of GBP15.4
billion and the remaining GBP1 billion outstanding of its Funding for Lending Scheme (FLS) drawings. In addition to the GBP1 billion
drawn in the first half of the year, the Group has made drawings of GBP12.7 billion in the third quarter from the Term Funding Scheme
with additional incentives for SMEs (TFSME) taking the total outstanding amount to GBP13.7 billion as at 30 September 2020. Overall,
total wholesale funding has reduced to GBP115.5 billion as at 30 September 2020 (31 December 2019: GBP124.2 billion) principally as a
result of growth in customer deposits.

The Group’s credit ratings continue to reflect the resilience of the Group’s business model and the strength of the balance sheet. In
October, Moody’s downgraded Lloyds Bank plc from Aa3/Negative to A1/Stable due to the removal of the uplift for Government support.
This was triggered by the downgrade of the UK sovereign rating a few days earlier given the agencies’ pandemic and Brexit concerns,
but did not impact the standalone rating of the bank. Over the year both S&P and Fitch have affirmed the Group’s ratings, albeit with
negative outlooks to reflect their concerns over the UK economy.

REVIEW OF PERFORMANCE (continued)

Capital

At 30 Sep At 31 Dec Change
2020 2019 %

CET1 ratio1,2 15.2 % 13.8 % 1.4pp
CET1 ratio 14.0 % 13.4 % 0.6pp
pre IFRS 9
transitional
relief1,2,3
Transitional 22.6 % 21.5 % 1.1pp
total capital
ratio1,2
Transitional 36.5 % 32.6 % 3.9pp
MREL ratio1,2
UK leverage 5.6 % 5.2 % 0.4pp
ratio1,2
Risk-weighted GBP205 bn GBP203 bn
assets1 1

Shareholders’ GBP43 bn GBP42 bn 2
equity
Tangible net 1.4 p
assets per
share 52.2 p 50.8 p

1 The CET1, total, MREL and leverage ratios and risk-weighted assets at 31 December 2019 are reported on a pro forma basis,
reflecting the dividend paid up by the Insurance business in the subsequent first quarter period.

2 Incorporating profits for the period that remain subject to formal verification in accordance with the Capital Requirements
Regulation.

3 CET1 ratio reflecting the full impact of IFRS 9, prior to the application of transitional arrangements for capital that provide
relief for the impact of IFRS 9.

Pro forma CET1 ratio at 31 December 2019 13.8 %
Banking business underlying capital build excluding 143
impairment (bps)
Impairment charge (bps) (167)
Banking business underlying capital build (bps) (24)
RWA, pensions and other movements (bps) 2
IFRS 9 transitional relief (bps) 84
Reversal of FY 2019 ordinary dividend accrual (bps) 83
CET1 ratio at 30 September 2020 15.2 %

The Group’s CET1 capital ratio increased by 145 basis points to 15.2 per cent over the first nine months of the year. Underlying
capital build of 143 basis points was more than offset by the 167 basis point impact of impairment in the period. Pension
contributions equivalent to 42 basis points reflecting the full accelerated 2020 contribution to the Group’s three main defined
benefit pension schemes and increased risk-weighted assets were largely offset by favourable market movements and the benefit of
reductions in excess expected losses and prudent valuation reserve. However, given the benefit of the in-year IFRS 9 transitional
relief (84 basis points) and the reversal of the full year 2019 ordinary dividend (83 basis points), the capital ratio increased to
15.2 per cent. The increase in the CET1 ratio of 64 basis points in the third quarter benefited from a stronger underlying build and
risk-weighted asset reductions, in part due to the continued optimisation of the Commercial Banking portfolio.

The Group applies the revised IFRS 9 transitional arrangements for capital set out under current European capital regulations. This
provides temporary capital relief for the increase in accounting impairment provisions following the initial implementation of IFRS 9
(‘static’ relief) and subsequent relief for any increases in Stage 1 and Stage 2 expected credit losses (‘dynamic’ relief). The
transitional arrangements do not cover Stage 3 expected credit losses. It is expected that a significant part of the Group’s
transitional relief that was built in 2020 will unwind in 2021, impacting CET1 ratios.

Whilst the net increase in IFRS 9 transitional relief in the first nine months of the year amounted to 84 basis points, the Group’s
total relief recognised at 30 September 2020 amounted to 121 basis points, including static relief. In the third quarter the Group
benefited from 5 basis points of IFRS 9 transitional relief.

REVIEW OF PERFORMANCE (continued)

Risk-weighted assets increased by GBP1.9 billion over the first nine months with increases from credit migrations and retail model
calibrations (c.GBP4.3 billion); regulatory changes (net GBP0.9 billion) and other various movements, including foreign currency and the
risk-weighted part of the Group’s investment in Insurance (GBP3.3 billion), partially offset by the reduction in underlying lending
balances (excluding Government-backed lending schemes that attract limited to no risk-weighted assets) (c.GBP3.2 billion) and
optimisation activity undertaken in Commercial Banking (c.GBP3.4 billion). Risk-weighted assets reduced by GBP1.8 billion in the third
quarter, largely reflecting reduced lending outside Government support schemes and the continued optimisation of the Commercial
Banking portfolio.

In the fourth quarter, risk-weighted assets will continue to be affected by credit migrations but this is expected to be offset by a
number of items including the continued optimisation of the Commercial Banking portfolio. Taking this into account the Group now
expects risk-weighted assets at year end to be broadly stable compared to 30 September 2020.

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Whilst credit migration and the unwind of IFRS 9 transitional relief in 2020 has so far been less than expected, it is likely that
these will have a fuller impact in 2021, consistent with economic forecasts. These will impact capital ratios as they evolve.

During the first half of 2020 the PRA reduced the Group’s Pillar 2A CET1 requirement from 2.6 per cent to 2.3 per cent. The PRA also
concluded its consultation on a proposed reduction in Pillar 2A to partially offset increased CET1 requirements from the UK
countercyclical capital buffer rate in normal conditions being set at 2 per cent (currently set at 0 per cent). This is expected to
reduce the Group’s Pillar 2A CET1 requirement by a further 0.3 per cent when it becomes effective before the end of the year
although, based on PRA policy statements, it is expected that this will be offset by other regulatory capital requirements.

Following the decision by the PRA to reduce the UK countercyclical capital buffer rate to zero earlier in the year, combined with the
Pillar 2A adjustment noted above, the Group’s CET1 capital regulatory requirement has reduced to c.11 per cent and subsequently
headroom over requirements has increased.

The Board’s view of the ongoing level of CET1 capital required by the Group to grow the business, meet regulatory requirements and
cover uncertainties is around 12.5 per cent, plus a management buffer of around 1 per cent.

The transitional total capital ratio increased to 22.6 per cent (31 December 2019: 21.5 per cent on a pro forma basis) and the
Group’s transitional minimum requirement for own funds and eligible liabilities (MREL), which came into force on 1 January 2020, is
36.5 per cent (31 December 2019: 32.6 per cent on a pro forma basis). The UK leverage ratio increased to 5.6 per cent.

ADDITIONAL FINANCIAL INFORMATION

1. Banking net interest margin and average interest-earning assets

Nine Nine
months months
ended ended
30 Sep 30 Sep
2020 2019

Group net interest income 9,173 7,425
– statutory basis (GBPm)
Insurance gross up (GBPm) (1,189) 1,559
Volatility and other items 112 291
(GBPm)
Group net interest income 8,096 9,275
– underlying basis (GBPm)
Non-banking net interest 151 103
expense (GBPm)
Banking net interest 8,247 9,378
income – underlying basis
(GBPm)

Net loans and advances to 439.2 447.2
customers (GBPbn)1
Impairment provision and 6.5 4.1
fair value adjustments
(GBPbn)
Non-banking items:
Fee-based loans and (5.5) (7.0)
advances (GBPbn)
Other non-banking (GBPbn) (3.7) (3.5)
Gross banking loans and 436.5 440.8
advances (GBPbn)
Averaging (GBPbn) (2.2) (6.8)
Average interest-earning 434.3 434.0
banking assets (GBPbn)

Banking net interest 2.54 2.89
margin (%)

1 Excludes reverse repos.

2. Return on tangible equity

Nine Nine
months months
ended ended
30 Sep 30 Sep
2020 2019

Average shareholders’
equity (GBPbn) 43.6 43.3
Average intangible assets
(GBPbn) (6.2) (5.9)
Average tangible equity
(GBPbn) 37.4 37.4

Underlying profit after
tax (GBPm) 732 4,543
Add back amortisation of
intangible assets (post
tax) (GBPm) 323 269
Less profit attributable
to non-controlling
interests and other equity
holders (GBPm) (388) (415)
Adjusted underlying profit
after tax (GBPm) 667 4,397

Underlying return on
tangible equity (%) 2.4 15.7

Group statutory profit
after tax (GBPm) 707 1,987
Add back amortisation of
intangible assets (post
tax) (GBPm) 323 269
Add back amortisation of
purchased intangible
assets (post tax) (GBPm) 53 56
Less profit attributable
to non-controlling
interests and other equity
holders (GBPm) (388) (415)
Adjusted statutory profit
after tax (GBPm) 695 1,897

Statutory return on
tangible equity (%) 2.5 6.8

ADDITIONAL FINANCIAL INFORMATION (continued)

3. Further impairment detail

Impairment charge by division on an underlying basis

Nine Nine Three Three
months months months months
ended ended ended ended
30 Sep 30 Sep 30 Sep 30 Sep
2020 2019 Change 2020 2019 Change
GBPm GBPm % GBPm GBPm %

Retail:
UK 624 (85) 21 (47)
Mortgages
Credit 792 380 136 113
cards (20)
UK Motor 268 153 27 49
Finance (75) 45
Other 734 368 (99) 139 145 4
2,4 816 323 260
18 (24)
Commercial
Banking:
SME 288 (54) 31 (6)
Other 1,2 248 (54) 135
08
1,4 194 (23) 129
96
Insurance 11 1 1 1
and Wealth –
Central 194 (61) – (19)
Items 100
Total 4,1 950 301 371
impairment 19
charge 19

Analysis of lending and ECL allowance by division

The analyses which follow have been presented on an underlying basis and reconciled to figures prepared on a statutory basis where
appropriate. Refer to basis of presentation on page 31.

Movements in ECL by division on an underlying basis

ECL Income ECL
at 30 Stateme at 31
Sep Net ECL nt Write-offs Dec
2020 increase charge and other 2019
GBPm GBPm GBPm GBPm GBPm

Retail:
UK 1,7 556 624 (68) 1,21
Mortgages 72 6
Credit 1,0 433 792 (359) 606
cards 39
UK Motor 557 170 268 (98) 387
Finance
Other 921 334 734 (400) 587
4,2 1,493 2,4 (925) 2,79
89 18 6
Commercial 2,5 1,275 1,4 (221) 1,31
Banking 90 96 5
Other 257 207 205 2 50
7,1 2,975 4,1 (1,144 4,16
Total1 36 19 ) 1

1 Total ECL includes GBP52 million relating to other non customer-related assets (31 December 2019: GBP19 million).

ADDITIONAL FINANCIAL INFORMATION (continued)

Group loans and advances to customers

Stage Stage
2 3
as % as %
Stage Stage Stage of of
Total 1 2 3 POCI1 total total
GBPm GBPm GBPm GBPm GBPm % %
At 30
September
2020
Gross
lending
(underlying
basis)
Retail:2
243
UK 289,4 ,09 41, 4,5
Mortgages 39 7 822 20 – 14.4 1.6
Credit 15,57 11, 3,4
cards 1 847 08 316 – 21.9 2.0
UK Motor 15,35 12, 2,8
Finance 0 276 38 236 – 18.5 1.5
28,19 25, 2,0
Other3 2 691 51 450 – 7.3 1.6
292
348,5 ,91 50, 5,5
52 1 119 22 – 14.4 1.6
Commercial
Banking:
32,39 26, 5,0
SME 7 421 98 878 – 15.7 2.7
61,07 47, 11, 2,5
Other 9 424 061 94 – 18.1 4.2
93,47 73, 16, 3,4
6 845 159 72 – 17.3 3.7
Insurance
and Wealth 888 802 13 73 – 1.5 8.2
Central 62,73 62,
items 9 732 – 7 – – –
Total gross
lending 430
(underlying 505,6 ,29 66, 9,0
basis) 55 0 291 74 – 13.1 1.8
Purchased
or
originated (1, (9, (2,
credit-impa 350 390 674 13,41
ired assets – ) ) ) 4
Acquisition
fair value
adjustment (568) 47 13 1 (629)
Total gross
lending 428
(statutory 505,0 ,98 56, 6,4 12,78

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basis) 87 7 914 01 5 11.3 1.3
Expected
credit loss
allowance
on drawn
balances (1, (2, (1,
(statutory (5,90 233 349 993
basis) 3) ) ) ) (328)
Net balance
sheet
carrying
value 427
(statutory 499,1 ,75 54, 4,4 12,45
basis) 84 4 565 08 7

1 Purchased or originated credit-impaired.

2 Retail balances exclude the impact of the HBOS and MBNA acquisition related adjustments.

3 Retail Other includes Business Banking, Loans, Overdrafts, Europe and Retail run-off.

ADDITIONAL FINANCIAL INFORMATION (continued)

Stage Stage
2 3
as % as %
Stage Stage Stage of of
Total 1 2 3 POCI1 total total
GBPm GBPm GBPm GBPm GBPm % %
At 30 June
2020
Gross
lending
(underlying
basis)
Retail:2
237
UK 286,3 ,78 44, 4,5
Mortgages 79 7 035 57 – 15.4 1.6
Credit 15,82 13, 2,0
cards 5 380 79 366 – 13.1 2.3
UK Motor 15,83 12, 2,9
Finance 0 674 20 236 – 18.4 1.5
26,78 24, 2,0
Other3 0 239 61 480 – 7.7 1.8
288
344,8 ,08 51, 5,6
14 0 095 39 – 14.8 1.6
Commercial
Banking:
31,76 25, 5,1
SME 9 742 81 846 – 16.3 2.7
66,84 52, 11, 2,9
Other 1 320 559 62 – 17.3 4.4
98,61 78, 16, 3,8
0 062 740 08 – 17.0 3.9
Insurance
and Wealth 871 765 23 83 – 2.6 9.5
Central 63,78 63,
items 1 773 – 8 – – –
Total gross
lending 430
(underlying 508,0 ,68 67, 9,5
basis) 76 0 858 38 – 13.4 1.9
Purchased
or
originated (1, (9, (2,
credit-impa 210 728 757 13,69
ired assets – ) ) ) 5
Acquisition
fair value
adjustment (582) 59 9 2 (652)
Total gross
lending 429
(statutory 507,4 ,52 58, 6,7 13,04
basis) 94 9 139 83 3 11.5 1.3
Expected
credit loss
allowance
on drawn
balances (1, (2, (2,
(statutory (5,98 332 168 161
basis) 6) ) ) ) (325)
Net balance
sheet
carrying
value 428
(statutory 501,5 ,19 55, 4,6 12,71
basis) 08 7 971 22 8

1 Purchased or originated credit-impaired.

2 Retail balances exclude the impact of the HBOS and MBNA acquisition related adjustments.

3 Retail Other includes Business Banking, Loans, Overdrafts, Europe and Retail run-off.

ADDITIONAL FINANCIAL INFORMATION (continued)

Stage Stage
2 3
as % as %
Stage of of
Total Stage 1 Stage 2 3 POCI total total
GBPm GBPm GBPm GBPm GBPm % %
At 31
December
20191
Gross
lending
(underlying
basis)
Retail:2
UK 289,8 258,7 26,83 4,2
Mortgages 45 60 8 47 – 9.3 1.5
Credit 18,11 16,05
cards 0 2 1,675 383 – 9.2 2.1
UK Motor 15,97 13,88
Finance 6 4 1,942 150 – 12.2 0.9
21,11 18,69
Other3 0 1 1,976 443 – 9.4 2.1
345,0 307,3 32,43 5,2
41 87 1 23 – 9.4 1.5
Commercial
Banking:
30,43 27,20
SME 3 6 2,507 720 – 8.2 2.4
66,06 59,86 2,7
Other 5 8 3,470 27 – 5.3 4.1
96,49 87,07 3,4
8 4 5,977 47 – 6.2 3.6
Insurance
and Wealth 862 753 32 77 – 3.7 8.9
Central 56,40 56,39
items 4 7 – 7 – – –
Total gross
lending
(underlying 498,8 451,6 38,44 8,7
basis) 05 11 0 54 – 7.7 1.8
Purchased
or
originated (2,
credit-impa (1,71 (9,90 740 14,36
ired assets – 8) 3) ) 1
Acquisition
fair value
adjustment (558) 82 6 1 (647)
Total gross
lending
(statutory 498,2 449,9 28,54 6,0 13,71
basis) 47 75 3 15 4 5.7 1.2
Expected
credit loss
allowance
on drawn
balances (1,
(statutory (3,25 447
basis) 9) (675) (995) ) (142)
Net balance
sheet
carrying
value
(statutory 494,9 449,3 27,54 4,5 13,57
basis) 88 00 8 68 2

1 Restated to reflect migration of certain customer relationships from SME business within Commercial Banking to Business Banking
within Retail.

2 Retail balances exclude the impact of the HBOS and MBNA acquisition related adjustments.

3 Retail Other includes Business Banking, Loans, Overdrafts, Europe and Retail run-off.

ADDITIONAL FINANCIAL INFORMATION (continued)

Group expected credit loss allowances (drawn and undrawn) as a percentage of loans and advances to customers

Total Stage 1 Stage 2 Stage 3 POCI
GBPm %1 GBPm %1 GBPm %1 GBPm %1,2 GBPm
At 30
September
2020
ECL
allowance
(drawn and
undrawn –
underlying
basis)
Retail:3
UK
Mortgages 1,772 0.6 111 – 918 2.2 743 16.4 –
Credit
cards 1,039 6.7 261 2.2 669 19.6 109 44.1 –
UK Motor
Finance4 557 3.6 198 1.6 215 7.6 144 61.0 –
Other5 921 3.3 328 1.3 431 21.0 162 48.2 –
4,289 1.2 898 0.3 2,233 4.5 1,158 21.7 –
Commercial
Banking:
SME 529 1.6 137 0.5 261 5.1 131 14.9 –
Other 2,036 3.3 203 0.4 562 5.1 1,271 49.0 –
2,565 2.7 340 0.5 823 5.1 1,402 40.4 –
Insurance
and Wealth 25 2.8 11 1.4 1 7.7 13 17.8 –
Central
items 205 0.3 199 0.3 – – 6 85.7 –
Total ECL
allowance
(drawn and
undrawn –
underlying 1,44
basis) 7,084 1.4 8 0.3 3,057 4.6 2,579 29.0 –
Purchased
or
originated
credit-impa
ired assets – (2) (411) (544) 957
Acquisition
fair value
adjustment (670) (12) (25) (4) (629)
Total ECL
allowance
(drawn and
undrawn –
statutory 1,43
basis) 6,414 1.3 4 0.3 2,621 4.6 2,031 32.7 328

1 As a percentage of drawn balances.

2 Stage 3 ECL allowances as a percentage of drawn balances are calculated excluding loans in recoveries in Credit Cards of GBP69
million and GBP114 million in Loans, Overdrafts and Business Banking within Retail other.

3 Retail balances exclude the impact of the HBOS and MBNA acquisition related adjustments.

4 UK Motor Finance for Stages 1 and 2 include GBP188 million relating to provisions against residual values of vehicles subject to
finance leasing agreements. These provisions are included within the calculation of coverage ratios.

5 Retail Other includes Business Banking, Loans, Overdrafts, Europe and Retail run-off.

ADDITIONAL FINANCIAL INFORMATION (continued)

Total Stage 1 Stage 2 Stage 3 POCI
GBPm %1 GBPm %1 GBPm %1 GBPm %1,2 GBPm
At 30 June
2020
ECL
allowance
(underlying
basis)
Retail:3
UK
Mortgages 1,763 0.6 108 – 907 2.1 748 16.4 –
Credit
cards 991 6.3 426 3.2 438 21.1 127 43.9 –
UK Motor
Finance4 563 3.6 194 1.5 217 7.4 152 64.4 –
Other5 897 3.4 341 1.4 383 18.6 173 49.3 –
1,06
4,214 1.2 9 0.4 1,945 3.8 1,200 22.1 –
Commercial
Banking:
SME 502 1.6 115 0.4 269 5.2 118 13.9 –
Other 2,238 3.3 210 0.4 602 5.2 1,426 48.1 –
2,740 2.8 325 0.4 871 5.2 1,544 40.5 –
Insurance

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and Wealth 25 2.9 11 1.4 1 4.3 13 15.7 –
Central
items 207 0.3 201 0.3 – – 6 75.0 –
Total ECL
allowance
(drawn and
undrawn –
underlying 1,60
basis) 7,186 1.4 6 0.4 2,817 4.2 2,763 29.6 –
Purchased
or
originated
credit-impa
ired assets – – (416) (561) 977
Acquisition
fair value
adjustment (699) (23) (18) (6) (652)
Total ECL
allowance
(drawn and
undrawn –
statutory 1,58
basis) 6,487 1.3 3 0.4 2,383 4.1 2,196 33.4 325

1 As a percentage of drawn balances.

2 Stage 3 ECL allowances as a percentage of drawn balances are calculated excluding loans in recoveries in Credit Cards of GBP77
million and GBP129 million in Loans, Overdrafts and Business Banking within Retail other.

3 Retail balances exclude the impact of the HBOS and MBNA acquisition related adjustments.

4 UK Motor Finance for Stages 1 and 2 include GBP191 million relating to provisions against residual values of vehicles subject to
finance leasing agreements. These provisions are included within the calculation of coverage ratios.

5 Retail Other includes Business Banking, Loans, Overdrafts, Europe and Retail run-off.

ADDITIONAL FINANCIAL INFORMATION (continued)

Total Stage 1 Stage 2 Stage 3 POCI
%1, %1, %1,2
GBPm 2 GBPm 2 GBPm %1,2 GBPm ,3 GBPm
At 31
December
2019
ECL
allowance
(drawn and
undrawn –
underlying
basis)
Retail:4
UK
Mortgages 1,216 0.4 26 – 614 2.3 576 13.6 –
Credit
cards 606 3.4 230 1.4 236 14.1 140 46.2 –
UK Motor
Finance5 387 2.4 216 1.6 87 4.5 84 56.0 –
Other6 587 2.8 194 1.0 233 11.8 160 50.3 –
2,796 0.8 666 0.2 1,170 3.6 960 19.1 –
Commercial
Banking:7
SME 273 0.9 45 0.2 127 5.1 101 14.0 –
Other 1,040 1.6 70 0.1 125 3.6 845 31.0 –
1,313 1.4 115 0.1 252 4.2 946 27.4 –
Insurance
and Wealth 17 2.0 6 0.8 1 3.1 10 13.0 –
Central
items 16 – 10 – – – 6 85.7 –
Total ECL
allowance
(drawn and
undrawn –
underlying
basis) 4,142 0.8 797 0.2 1,423 3.7 1,922 22.5 –
Purchased
or
originated
credit-impa
ired assets – – (334) (455) 789
Acquisition
fair value
adjustment (706) (27) (17) (15) (647)
Total ECL
allowance
(drawn and
undrawn –
statutory
basis) 3,436 0.7 770 0.2 1,072 3.8 1,452 25.0 142

1 As a percentage of drawn balances.

2 ECL allowances as a percentage of drawn balances as at 31 December 2019 restated to reflect migration of certain customer
relationships from the SME business within Commercial Banking to Business Banking within Retail.

3 Stage 3 ECL allowances as a percentage of drawn balances are calculated excluding loans in recoveries in Credit Cards of GBP80
million and GBP125 million in Loans, Overdrafts and Business Banking within Retail other.

4 Retail balances exclude the impact of the HBOS and MBNA acquisition related adjustments.

5 UK Motor Finance for Stages 1 and 2 include GBP201 million relating to provisions against residual values of vehicles subject to
finance leasing agreements. These provisions are included within the calculation of coverage ratios.

6 Retail Other includes Business Banking, Loans, Overdrafts, Europe and Retail run-off.

7 Stage 2 up to date loans are assigned to PD movement if they also meet other triggers. This represents a change in presentation for
Commercial Banking where these loans were reported in Other at 31 December 2019.

ADDITIONAL FINANCIAL INFORMATION (continued)

Group Stage 2 loans and advances to customers

Up to date 1-30 days past due Over 30 days past due
PD movements Other1
Gross Gross Gross Gross
lending ECL lending ECL lending ECL lending ECL
GBPm GBPm %2 GBPm GBPm %2 GBPm GBPm %2 GBPm GBPm %2
At 30
September
2020
Underlying
basis
Retail:3
UK 25,9 9,80 2,83 3,21
Mortgages 65 360 1.4 8 216 2.2 3 107 3.8 6 235 7.3
Credit 2,87
cards 0 518 18.0 423 107 25.3 84 28 33.3 31 16 51.6
UK Motor 1,77
Finance 888 79 8.9 7 69 3.9 136 46 33.8 37 21 56.8
Other4 935 221 23.6 784 105 13.4 215 70 32.6 117 35 29.9
30,6 12,7 3,26 3,40
58 1,178 3.8 92 497 3.9 8 251 7.7 1 307 9.0
Commercial
Banking:
4,81
SME 8 241 5.0 148 7 4.7 60 8 13.3 72 5 6.9
10,4
Other 94 553 5.3 239 5 2.1 44 1 2.3 284 3 1.1
15,3
12 794 5.2 387 12 3.1 104 9 8.7 356 8 2.2
Insurance
and
Wealth – – – 13 1 7.7 – – – – – –
Central
items – – – – – – – – – – – –
Total
(underlyin 45,9 13,1 3,37 3,75
g basis) 70 1,972 4.3 92 510 3.9 2 260 7.7 7 315 8.4
POCI
assets and
acquisitio
n fair
value (5,2 (1,5 (1,1 (1,5
adjustment 08) (174) 51) (76) 14) (53) 04) (133)
Total
(statutory 40,7 11,6 2,25 2,25
basis) 62 1,798 4.4 41 434 3.7 8 207 9.2 3 182 8.1

1 Includes forbearance, client and product specific indicators not reflected within quantitative PD assessments.

2 ECL allowances as a percentage of drawn balances.

3 Retail balances exclude the impact of the HBOS and MBNA acquisition related adjustments.

4 Retail Other includes Business Banking, Loans, Overdrafts, Europe and Retail run-off.

ADDITIONAL FINANCIAL INFORMATION (continued)

Up to date 1-30 days past due Over 30 days past due
PD movements Other
Gross Gross Gross Gross
lending ECL lending ECL lending ECL lending ECL
GBPm GBPm % GBPm GBPm % GBPm GBPm % GBPm GBPm %
At 30 June
2020
Underlying
basis
Retail:1
UK 26,5 11,1 4,00
Mortgages 07 352 1.3 22 210 1.9 2,403 78 3.2 3 267 6.7
Credit 1,55
cards 5 309 19.9 438 98 22.4 63 19 30.2 23 12 52.2
UK Motor 1,87
Finance 784 57 7.3 1 67 3.6 142 40 28.2 123 53 43.1
Other2 947 192 20.3 793 104 13.1 183 55 30.1 138 32 23.2
29,7 14,2 4,28
93 910 3.1 24 479 3.4 2,791 192 6.9 7 364 8.5
Commercial
Banking:
4,70
SME 2 234 5.0 245 11 4.5 139 17 12.2 95 7 7.4
11,0
Other 18 592 5.4 239 5 2.1 29 2 6.9 273 3 1.1
15,7
20 826 5.3 484 16 3.3 168 19 11.3 368 10 2.7
Insurance
and Wealth 1 – – – – – – – – 22 1 4.5
Central
items – – – – – – – – – – – –
Total
(underlyin 45,5 14,7 4,67
g basis) 14 1,736 3.8 08 495 3.4 2,959 211 7.1 7 375 8.0
POCI
assets and
acquisitio

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